Effective Grants Management and Cost Allocation Nonprofit Forum

Effective Grants Management and Cost Allocation – FTM Nonprofit Forum for April 25, 2018

Nonprofit Forum Agenda for April 25th

11:30 to 1:00 – Financial Management Topic

Nonprofit Forum Registration – free for Nonprofit Organizations

Effective Grants Management and Cost Allocation

How should you perform your grants management and cost allocation responsibilities? We will describe the best practices for these responsibilities. Please bring your questions so we can have a candid and productive conversation.

We will cover the critical aspects grants management and cost allocation including:

  • General grants management requirements
  • Governance requirements for grants administration
  • Review Uniform Grant Guidance
  • Internal control and financial management system requirements for federal awards
  • Schedule of Expenditures of Federal Awards and associated audit requirements
  • Cost Allocation methodologies including examples
  • Cost Allocation plan requirements
  • Best practices for grant budget financial management
  • Best practices for grant reporting and reconciliations
  • Performing an effective grant close out
  • How to use your accounting system to perform grants management role?
  • How to maximize your grant reimbursement?
  • What are signs that grants management role is not being performed?
  • How should you as leader evaluate your various options?

We will share our expertise and candid advice to better prepare you for these complex decisions.

3 Key Things you will learn include:

  • What are best practices for performing grants management role effective?
  • What are federal compliance grants management requirements?
  • What are signs that grants management role is not being performed correctly?

Those attending the forum will receive handouts.

Click here to register for the April Nonprofit Forum

March Common Audit Pitfalls and Misperceptions

Common Audit Pitfalls and Misperceptions – FTM Nonprofit Forum for March 28, 2018

Nonprofit Forum Agenda for March 28, 2018

11:30 to 12:30-Financial Management Topic
Common Audit Pitfalls and Misperceptions

Click here to register

While not required by law, one reason a nonprofit might conduct an audit is to demonstrate the organization’s commitment to financial transparency and accountability.

And while a nonprofit can spend considerable resources for its annual audit, it is important that it consider the following to ensure the audit is a success:

  • No delays: An audit needs to avoid any major delays.
  • Minimal accrual and year-end adjustments: The nonprofit needs to ensure that all accrual and year-end adjustments are completed prior to the start of the audit.
  • Minor board and management comments: It is a good idea to have an exit interview after the fieldwork to review the audit’s results.
  • No material weakness or significant deficiency: This is a deficiency in internal controls that could negatively impact financial integrity.
  • Nonprofit should prepare audited financial statements and related disclosures: The organization should have the ability and accounting systems to prepare the audited financial statements and related footnotes and disclosures.
  • Fraud detection is not purpose of audit: While nonprofit leaders may believe the annual audit will uncover fraud, it is very unlikely this will occur.
  • Auditor does not guarantee financial statement accuracy: While auditor does issue an opinion on the nonprofit’s financial statements, the auditor does not certify or guarantee its accuracy.
  • If your nonprofit has one of these audit pitfalls or misperceptions, you should take action to bring expertise and capacity to your organization to remedy it.

This webinar will help Executive Directors, Finance Directors, and finance staff to develop and use a financial policies and procedures manual. Savvy nonprofit leaders know that effective financial audits can be the difference between good and great performance.

Those attending the forum will receive handouts.


Click here to register

Assess Your Organization’s Vulnerability to Fraud

It’s a people problem, so combat it with governance.   

Purchasing schemes, cash skimming, and financial statement fraud are three very different types of fraud that nonprofits must prevent, detect, and insure against. Still, behind each of them – and every variety of deliberate, deceptive act against nonprofits – there’s a fundamental and shared dynamic at play.

Fraud isn’t just an operational or financial risk. It’s inherently a human risk, meaning it often crosscuts numerous functions and departments within a nonprofit organization. Not only that, but the people behind these acts are complex. They’re pressured by varying circumstances, motivated by different opportunities, and self-assured by their own unique rationales. Making matters more complicated, fraud isn’t always a solo act. In fact, a report by the Association of Certified Fraud Examiners (ACFE) found that 46% of fraud cases involve multiple perpetrators. When fraud occurs, the web of nefarious activity often extends to surprising depths within an organization.

To combat this threat, nonprofits face a critical need to address fraud, starting with more guidance and engagement from leaders and boards to create an anti-fraud environment and oversee a fraud risk management function. One of the most important deterrents of fraud is knowing that the organization’s leaders have no tolerance for it, will act accordingly to detect it, and will take appropriate action if they find it. Begin by focusing on these four steps:

1. Find a Catalyst

You need a high-ranking sponsor to get fraud risk management off the ground. This leader’s first order of business should be deciding whether the organization’s fraud risk management will be integrated into the existing risk management function (which typically focuses on strategic, operational, reporting, and compliance risks) – or whether it will be separate. Either way, the goal is the same: Embed a risk management element into the daily activities of all your personnel.

2. Create Responsibilities & Structures

With your management process in place, establish a governance structure for it, including designated oversight responsibilities at the board level, such as an audit committee. Keep in mind, this framework and the tools your organization uses should be scaled to fit both your size and your available resources. It’s impossible to completely “fraud-proof” any organization, so understand the weak points in your infrastructure and organization, and then work backwards to execute your anti-fraud processes. Also, while fraud prevention is ideal, many nonprofits have to weigh the costs and practicality of preventive processes versus detective measures.

3. Engage & Educate

Especially when faced with resource constraints, nonprofits should engage all their staff in an ongoing system of fraud deterrence. Above all, provide your employees with workshops and trainings in which you educate them on why people perpetrate fraud, which red f lags to watch for, and what resources – such as whistleblower policies, reporting systems, and hotlines – are available to them. Awareness throughout your organization can be the single most effective fraud deterrent and vehicle for detection, but it has to start from the top.

4. Craft Dynamic Risk Assessments

People are dynamic, so your risk assessments must keep pace. With roles and responsibilities identified, use your team to pinpoint which inherent risks exist. Then prioritize these risky situations based on their impact, likelihood, and the speed at which they’re apt to occur. Finally, use those priority rankings to map the best preventive and detective controls.

Source: “Assess Your Organization’s Vulnerability to Fraud”. Nonprofit World. October/November/December 2017. Vol. 35, No. 4: 20 – 21. Print.

Why Nonprofits Should Stop Hoarding Cash?

Take a close look at your cash reserves.  You may be able to put your cash to much better use. 

As you prepare your financial plans for the year ahead, be sure to examine your cash position. It’s important not to amass cash at the expense of much-needed investment income.

Many nonprofits believe they should maintain a cash reserve of three to 12 months of operating expenses. However, while it’s certainly prudent to keep a sensible amount of cash on hand for payroll, for expenses, and to cover financial shocks and surprises, many nonprofits routinely hold too much cash in money market accounts.

The underlying reason to hold cash – to keep funds safe and available for a rainy day – is a sensible one. But most cash holdings can be held instead in short-term investments that can provide additional yield without taking on significant risk.

Seeking to find the right balance should start with a detailed analysis that reveals when cash flows come in and when payments and distributions are needed. For example, organizations funded via regular scheduled payments or grants don’t need as large a cash cushion as an organization that generates a great deal of its cash through seasonal fundraising. Once the minimum cash reserve (including some money for surprises) is calculated, the excess balance should be invested unless there are financial reasons, such as a loan covenant, that demands a certain cash position.

While cash is invested, it should be maintained in vehicles that carry minimal risk, such as mutual funds, with the duration of those investments matched against when the cash will be needed. While an organization doesn’t typically need all its cash tomorrow, it might need some of those funds in six months, one year, or two years, and these monies should be invested accordingly. Many ultra-short-duration products, which invest in bonds that mature in a year or less, and short-term bond funds (with maturities of 1-3.5 years) will capture some additional yield for taking on minimal interest rate risk. Nonprofits can also consider short-duration TIPS (Treasury Inflation-Protected Securities).

Rates are expected to rise after being held close to zero for the years following the financial crisis. Although fixed income investments will temporarily lose money if interest rates rise, losses are likely to be very limited given the short-term nature of the investment. Ultrashort funds are able to reinvest maturing debt at higher yields as rates rise. Still, it’s possible that such funds could suffer short-term losses in the rare event of interest rates rising rapidly or in the case of a credit event. It’s extremely rare, however, that such vehicles lose money over extended periods of time.

A decade ago when cash deposits paid as much as 4%, many organizations saw little reason to chase an extra percentage point of yield by investing their cash reserves. Fast forward to today, with the rate of inflation now exceeding the return on money market accounts and yields on investment portfolios challenged by a low-yield environment. Being smart with cash makes more sense than ever.

Source: “Why Nonprofits Should Stop Hoarding Cash”. Nonprofit World. October/November/December 2017. Vol. 35, No. 4: 30. Print.

Are you in Compliance with ASU 2016-4? Financial Statement Presentation of Not-for-Profit Entities


In November 2011, the Financial Accounting Standards Board (FASB) added a project to its agenda focusing on the financial reporting of not-for-profit (NFP) entities. The project has resulted in the issuance of Accounting Standards Update (ASU) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. The update strives to improve how a NFP organization classifies its net assets and provides information in its financial statements and notes about its financial performance, cash flows and liquidity.  We have summarized the full 270-page standard into this brief guide which outlines the primary changes to the financial statements of not-for-profit organizations.

Net Asset Classes

  • Replaces the current three net asset classes with the following two:
    • Net assets with donor restrictions
    • Net assets without donor restrictions
  • Removes hardline distinction between temporary and permanent restrictions
  • Enhances disclosure requirements:
    • Amounts and purposes of board-designated net assets
    • How restrictions affect the use of resources

Underwater Endowments

  • Presents deficits relative to original gift amounts of donor-restricted within the donor-imposed restrictions class of net assets
  • Enhances disclosure requirements:
    • Governing board’s policy related to appropriations from such funds
    • Any action taken during the period related to such funds
    • Original gift amount or level otherwise required to be maintained by the donor or law
    • Amount of the underwater endowments in the aggregate

Expiration of Restrictions – Long-lived Assets

  • Requires use of the “placed-in-service approach” for determination of when restrictions expire
  • No longer allows the recognition of the expiration of restrictions over the asset’s useful life

Statement of Cash Flows

  • May continue to elect either the direct or indirect method
  • When using the direct method, no longer requires the reconciliation of changes in net assets to cash flows from operating activities

Liquidity and Availability of Resources

  • Requires disclosure of qualitative information about how liquid resources are managed
  • Requires disclosure of quantitative information related to availability of financial assets to meet cash needs for general expenditures within one year, including impact of the following on financial assets:
    • Nature of the financial assets
    • External limits by donors, grantors, laws and contracts
    • Internal limits by the governing board

Investment Return

  • Requires external and direct internal investment expenses to be net against investment returns
  • Removes requirement to disclose amount of investment expenses net against investment returns
  • Clarifies what activities constitute direct internal investing activities:
    • Salaries and related expenses of staff responsible for the development and execution of investment strategy
    • Allocable costs associated with internal investment management and supervising, selecting, and monitoring of external investment management firms
  • Permits separate, appropriately labeled line items on the statement of activities for net investment return managed differently or derived from different sources
  • Eliminates the requirement to present investment return components for changes in endowment net assets

Reporting of Expenses

  • Requires all NFPs to report expenses by nature
  • Retains requirement to report expenses by function
  • Requires expense analysis by nature and function to be presented in one location, in either:
    • The statement of activities
    • A separate statement of expenses (similar to the statement of functional expenses)
    • A schedule in the notes
  • Enhances disclosures related to methods used to allocate costs among functions
  • Updates descriptions of management and general activities

Effective Date and Transition

  • Annual financial statements issued for fiscal years beginning after Dec. 15, 2017
  • Early application is permitted
  • Requires adoption on retrospective basis for all years presented, except for:
    • Analysis of expenses by nature and function
    • Disclosures related to liquidity and availability of resources

FTM Nonprofit Forum Recorded Web Cast from January 24, 2018 is now available

What’s Your Nonprofit Tax IQ for Year End Tax Compliance?

Our FTM Nonprofit Forum for January, 2018 video recording and web cast is now available for your use.

Click here to view the recorded web cast and related video.

We hope you find this topic helpful and let us know how we can help you.


What's Your Nonprofit Tax IQ – Year End Tax Compliance-January 24, 2018 from Jim Simpson on Vimeo.

Abila MIP Fund Accounting 1099 and W-2 Processing-FREE Web Cast from January, 2018

We are pleased to provide you with our recorded web cast.   Click here to view recorded web cast and video.

In this course, participants will create, review, and correct IRS Forms and 1099-MISC, INT, DIV, and R. Participants will learn to produce and print the IRS forms in paper and submit electronically via Aatrix. Helpful reports and troubleshooting tips will be covered.

In this course, participants will create, review, and correct IRS Forms (i.e. W-2’s, and W-3’s). Participants will learn to produce and print the IRS forms on paper and submit electronically via Aatrix. Participants will learn what is involved in starting a new payroll year. Helpful reports and troubleshooting tips will be covered.

The donated value of this two hour web cast is $250.

Follow Key Metrics to Mission Fulfillment

We’re pleased to offer a valuable, 7-page document on nonprofit outcome metrics.

Click here to access ‘Outcome Metrics: Measuring What Matters in the Nonprofit World’

The topics covered include:

  • The Age of Transparency and Accountability
  • What are Outcome Metrics?
  • Why Outcome Metrics Matter?
  • Who’s Monitoring Nonprofit Performance?
  • Linking Metrics to the Mission
  • The Best Path to Success: A Balanced Approach
  • Set Up Your Plan
  • The Right Financial Software System Matters
  • Conclusion: Making a Difference

Click here to get your complimentary copy

Outcome metrics deliver value only if they are tightly aligned to your core values and mission (otherwise, they are only a resource-draining distraction). So it’s best to start with a simple template that defines what matters – your organization’s short- and long-term objectives – and the impact measures that effectively map to them.

Set goals and strategies that help to ensure your activity measures support the overarching mission. These might include progress toward goals, and program implementation; e.g. projects launched and sites protected.

Finally, drill down to define the supporting tactics and activities. These might be measures of memberships, funding, or growth in fundraising.

However you establish and define your outcome metrics, keep it simple – and never lose focus of what truly matters to your organization.


Accounts Payable and Accounts Receivable-MIP Spotlight

We will be focusing each Module of the Month on a particular software module or application that helps our clients.

We are going to focus this article on the Accounts Payable and Accounts Receivable Module. We focused on tips and tricks during the MIP User Group portion of the August 30, 2017 FTM Nonprofit Forum – you can watch the recording here.

Our module refresher will include the following topics:

  • Accounts Payable Query for Vendor Balances and Activity
  • Changing AP Invoices after posting and check production
    Voiding a Check
  • When to use Accounts Payable Invoices versus Cash Disbursements
    Setting up un-posted and posted transaction reports for Accounts Payable Invoices
  • Using the AP reports to include Accounts Payable Aging and Vendor Activity
  • Assigning Manual Checks and bank payments to Invoices
    Best Practices to enter in credit card charges
    Setting up an after the fact Accounts Receivable Invoice

Let us help you to maximize your use of the MIP Accounts Payable and Accounts Receivable Modules. Our firm and staff use MIP Fund Accounting on a daily basis so let us help you maximize the use of this powerful application.